1.Suppose that the government of Ansonia is experiencing a large budget deficit with fixed government expenditures of G = 250 and fixed taxes of T= 150Assume that consumers of Ansonia behave as described in the following consumption function:

C = 300 + 0.8 (Y − T)

Suppose further that investment spending is fixed at 200.
Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and Next, assume that the Republican Congress in Ansonia succeeds in reducing taxes by 30 to a new fixed level of 120. Recalculate the equilibrium level of GDP using the tax multiplier. Solve for equilibrium levels of Y, C, and after the tax cut and check to ensure that the multiplier worked. What arguments are likely to be used in support of such a tax cut? What arguments might be used to oppose such a tax cut?